In 2010 an Australian businessman,Peter Mason,was sitting in his Sydney office when the phone rang. He didn’t know that he was about to have a conversation with a spy he’d never met. It was a story he would be telling for years to come.

Australia’s then director-general of security,the formal title of ASIO’s chief,introduced himself. David Irvine proceeded to invite Mason to a one-on-one lunch. Mason is very well known in corporate Australia. After a career in investment banking,he chaired establishment institutions including AMP and David Jones,became a trustee at the Sydney Opera House Trust,and is on the board of Optus’s parent company,Singtel. He wasn’t hard up for a lunch invitation. But he’d never had anything to do with ASIO. He suspected it was a prank call.

“How will I know it’s you at the restaurant?” Mason wanted to know.

“Because I’ll be there to greet you,” replied Irvine. “Trust me enough to come to lunch. And if I’m not there,you’ll know it’s not me.”

Mason chuckled as he related the story to friends afterwards. “I was sceptical,but given the nature of the invitation,I said yes.” As Mason took his seat at the lunch table,Irvine made his opening gambit:“So how is the transaction in Beijing going?” AMP was in the midst of negotiating a large deal in China. But it was strictly confidential. “That got my attention,” Mason recalled.

Irvine demonstrated his bona fides. He knew that Mason had been to Beijing recently. He knew that he’d stayed at the Westin Hotel. He even knew that the hotel had upgraded him to a corner room. “The Chinese were listening to you the whole time,” Irvine told him. “And we were listening to them.” He didn’t reveal how.

Now he came to his point. Mason recounted:“ASIO wanted me to know that they were very nervous about China’s infiltration of Australia’s communication system.” Specifically,they were concerned about the Chinese telecommunications equipment manufacturer Huawei,pronounced “Wah-way”,one of China’s great companies and national champions. “And I should be aware as a director of Australian and international companies that it was a
matter of sensitivity for Australia.”

Irvine has confirmed that he was issuing discreet alerts to large Australian companies at the time. “Quite early on,ASIO found that it was in a position that it had to advise a number of major Australian companies that they had been compromised,most likely by China. We had a fair degree of certainty,” he told me recently. “Huawei would have come up.”

Australian companies had scant awareness of cyber espionage at the time. Where ASIO was able to detect cyber theft and cyber intrusion,it quietly told the target companies. Often it was after the damage had been done. Victim companies sometimes accepted ASIO’s advice;in that era of cyber innocence,others refused to believe it was possible. ASIO had to convince them before they took any protective measures. ASIO sometimes gave companies pre-emptive warning. Irvine’s lunch date with Peter Mason was one such alert.

Irvine,now chair of the Foreign Investment Review Board,spent a lot of time briefing banks,mining companies and other major businesses in 2010. It would take longer for smaller companies to discover that their intellectual property had been stolen. As an official who was working in intelligence at the time observes,“They really only found evidence of that when duplicates of their products came out,coming mainly out of China.”

Huawei has always protested its innocence. It’s a privately held firm,all shares owned by its founder,Ren Zhengfei,a former officer in the People’s Liberation Army,and the company’s China-based staff. It maintains that it neither conducts espionage for the Chinese government nor would it do so even if instructed to.

“The Chinese were listening to you the whole time. And we were listening to them.”

Western governments have nevertheless been increasingly suspicious. Beijing advocates for the company ceaselessly with foreign governments. And under President Xi Jinping,a new national security law requires all companies,public and private,to obey all instructions from the government. The line between the state sector and the private grows more blurred by the day.

The federal government itself acted on ASIO’s warnings about Huawei. There were three phases. First, in 2010 the board of the NBN quietly decided that it would not accept any of Huawei’s bids to take part in the creation of the national broadband network. This followed a briefing from Irvine and the then national security adviser,Duncan Lewis. Second,theNBN ban on Huawei was publicly confirmed by the Gillard government in 2012. Third was the Turnbull government’s2018 ban on Huawei and ZTE from constructing Australia’s 5G network.

“So the government’s position of being very wary of Huawei was consistent,starting with the Rudd government in 2010,then Gillard and then Turnbull,” says the intelligence official.

Peter Mason’s encounter with Irvine occurred more than 10 years ago,which indicates that the informal system of quiet warnings and secret persuasion was working. If Australia’s authorities knew of the risk posed by Huawei and were able to counter it silently,why did they ultimately make a public declaration,which was bound to arouse complaints from Beijing?

Malcolm Turnbull was troubled. It was late 2017,and the prime minister was considering banning Huawei from the Australian continent. The telecommunications equipment maker happened to be the biggest in the world in its industry. Several countries had talked about banning it,but none had. The flagship company was to become an international acid test of nations’ trust in China.

Australia was about to start building its 5G,or fifth-generation,Wi-Fi network. Much more than a phone system with faster internet,5G would enable the Internet of Things,where the web will connect everything from your home airconditioning system and your pacemaker to your driverless car and your baby monitor. Could Huawei be trusted to supply the country’s central nervous system for a generation? Turnbull didn’t think so. “One thing you know – if the Chinese Communist Party called on Huawei to act against Australia’s interests,it would have to do it,” he says. “Huawei says,‘Oh no,we would refuse.’ That’s laughable. They would have no option but to comply.”

But the consequences of a ban? Turnbull knew that Beijing would seek to punish Australia. Of course,China allows no foreign companies to build its 5G network. But Beijing is not about reciprocity. It’s about dominance. President Xi Jinping had made it his personal mission to place Huawei at the centre of the global internet. He would later tell then US president Donald Trump that a ban on Huawei would “harm the overall bilateral relationship”,according to Trump’s former national security adviser,John Bolton. It was a remarkable elevation. Xi was putting the interests of one Chinese company at the centre of the world’s most consequential great-power relationship. It was,evidently,an extraordinary priority for China.

Turnbull sought a middle path. He was not looking to upset relations. Australia was deeply committed to the opioid temptation of effortless,limitless profit,to the lotus flower of China’s allure. And too anxious about losing its supply of the sweet narcotic. Was there a way to accept Huawei into the system and somehow manage the risk? That’s what Britain had done with Huawei in its 4G network. London allowed Huawei to supply its 4G gear but with a special-purpose monitoring centre and British engineers reading millions of lines of computer code to check for espionage backdoors.

Turnbull’s history showed no inherent hostility to the Chinese company. When Julia Gillard’s Labor government banned Huawei in 2012 from
supplying gear to the new national broadband network,Turnbull,as the shadow communications minister,promised to review the ban once in government. The Liberals ended up continuing Gillard’s ban. But now Huawei – and the Beijing government – was pressing to enter the next frontier.

Turnbull spent months researching,talking to Trump and other leaders in late 2017 and early 2018. He repeatedly turned to Australia’s top-secret electronic spy agency,the Australian Signals Directorate (ASD) – equivalent to the US National Security Agency – for an expert verdict. “I went back and forth with Mike Burgess[then head of the directorate and now ASIO’s director-general of security],pressing him to find an effective means of mitigating the risk. I would have preferred to have all vendors available in Australia,but not at the expense of security.”

Burgess did come up with some mitigation measures. He and the ASD experts compiled a spreadsheet filled with hundreds of them. “We gave it a good red-hot go,” a senior intelligence official involved in the process tells me. But there was a catch.

Turnbull,says the intelligence official,“is a big believer in tech. His starting point was,‘Convince me that we can’t manage the risks.’ We worked extremely hard over eight,nine months,working it through.” The signals-
intelligence experts started from the proposition that Huawei equipment could be used in Australia’s 5G network. They asked themselves the question:how can we manage that risk effectively?

Burgess gathered his professional hackers from the ASD and asked them to play the Red Team,to put themselves in China’s shoes. They were “the best and the brightest”,says the official,drawn from the section that would be used to hack into networks overseas. They were told:“Let’s game it. Apply what we would do if we had a vendor that was working for us.” The telecommunications equipment vendor in question being Huawei,of course,the global leader in low-cost,high-grade telecoms gear.

A technologically sophisticated government already has the know-how to disrupt another country’s 5G system. But if that government has sway over a 5G vendor in the country it wants to strike,explained the official,“you can get there quicker from flash to bang,with zero cost of entry.” It could be done with a simple instruction to the company operating in the target nation’s 5G system. And that would be a “serious problem” for the target country.

Because it would bring down a network? Yes,but it’s more than that,said the senior Australian spy:“Here’s the thing that most commentators get confused about with 5G,including some of our American friends. It’s not about the interception of telephone calls. We’ve got that problem with 4G,we had it with 3G. It’s not that 5G is just a faster mobile phone network. It has lower latency.[It’s about] the speed at which boxes can talk to each other,and[at] higher density,so more devices can connect per square kilometre than ever before. It’s machines talking to machines.”

And if the 5G network stops working? “The sewerage pump stops working. Clean water doesn’t come to you. You can imagine the social implications of that. Or the public transport network doesn’t work. Or electric cars that are self-driving don’t work. And that has implications for society,implications for the economy.”

If the 5G network stops working? “The sewerage pump stops working. Clean water doesn’t come … you can imagine the social implications.”

For these reasons,the 5G network will be “number one on our critical infrastructure list” in need of protection once it’s fully operational. Shutting down a 5G network at that point could throw the country into chaos.

So how would the Chinese government use Huawei to do such a thing? Putting himself in Beijing’s shoes,the intelligence officer says:“If I want to understand how to break in,I don’t have to break in. I just look at the blueprints – I understand the software,I know how it works. I know which engineering commands are there or what other commands are there for my purposes. That allows me to gain access,to switch things off,and that disrupts the country – elements of it,or the whole country. That’s why you’ve got to be concerned.”

Turnbull steeped himself in the detail. The then prime minister was “very forensic in his questioning,he obviously did his own homework”,relates the senior spy. “Bought himself a book on 5G security,I kid you not. We had to buy the book and make sure we understood it. It was a good grilling.[He] actually took us out for a spin.” The book,A Comprehensive Guide to 5G Security, is a dense,technical 474-page tome edited by experts in Finland,the US and Sweden.

As the Red Team of hackers worked through the risks,they compiled them in a spreadsheet. There were more than 300. Which meant that all 300-plus would need to be mitigated. Burgess and his staff brought the full compilation to Turnbull on A3 sheets of paper and explained all the measures. They included having full and sole access to the source code,updates being done in Australia only,and full access to hardware schematics.

But even then,it would not be enough,they concluded. The devil was not only in the details – it was in the system design itself. And that was too hard to penetrate as outsiders. The senior intelligence officer explains:“It’s the control of the design that gives you zero cost of entry. It’s a lot harder to reverse-engineer to find the malign element. As opposed to talking to the designers and saying – as well as its legitimate function – if I give you this secret handshake,that requires you to turn it off. You can get there the hard way through trying to reverse-engineer it,or you can get there the zero-cost way by talking to the person who knows how it works. That’s the differentiating factor.”

On this basis,5G components designed in China and made in a factory in China would pose a bigger risk than 5G components assembled in a factory in China but designed by Nokia in Finland or Ericsson in Sweden. In other words,it came down to strategic trust. The Commonwealth of Australia could rely on the Republic of Finland,home to Nokia,and the Kingdom of Sweden,Ericsson’s domicile,but it could not trust the People’s Republic of China to harbour only benign intentions.

What about simply limiting the deployment of Huawei’s gear to less sensitive parts of the 5G network? This is exactly what Australia did in accepting Huawei into its 4G system.

“Historically,we have protected the sensitive information and functions at the core of our telecommunications networks by confining our high-risk vendors to the edge of our networks,” the Australian Signals Directorate’s then chief,Mike Burgess,said in a 2018speech. “But the distinction between core and edge collapses in 5G networks. That means that a potential threat anywhere in the network will be a threat to the whole network.” Turnbull liked to summarise this in internal debates with the rhyme that “the core is no more”. Burgess’s final advice to Turnbull and his National Security Committee was that the risk could not be mitigated.

Turnbull examined the question with his ministers and public service chiefs in the cabinet’s National Security Committee. If allowing Huawei into the system was a risk,a ban on it would carry risks of its own. Beijing had
already damned Canberra when Turnbull introduced laws against foreign interference and espionage in December 2017,by ending annual visits by Chinese leaders and freezing ministerial contacts. It already had an embargo on political contacts with Australia. Now Australia would be uniquely exposed to Beijing’s retribution if it were to be the first country in the world to designate Huawei as untouchable.

At this point,Peter Dutton intervened. The then minister for home affairs had been involved in National Security Committee debates about Huawei for months,and he was growing concerned about Turnbull’s resolve. Dutton tells me:“Australia had been in[an] appeasement phase for a long time. We’d allowed dollars to cloud our judgment. We were on a knife-edge,speaking frankly. Huawei was the tipping point. A number of us had pushed for years. The public was there[in supporting a tougher line],the advice to us and the intelligence was clear – why are we not responding?

“I saw this as a momentous decision for the government because it would affect the wellbeing of the nation for a generation. 5G will control autonomous vehicles,it will be doing remote monitoring of medical devices. It would be unconscionable to allow it to be compromised.”

Dutton approached the then prime minister in the cabinet anteroom after a National Security Committee meeting on June 27,2018,about six weeks before the government was due to make its final decision. “I said to him,‘This is a red line for me. We cannot allow Huawei into the network. I think the threat is only increasing,not mitigating.’ ” It was a threat to resign from the Turnbull cabinet. And that made it a leadership issue. Australia’s political class had been feverish for a decade indulging the apparently addictive craze of dumping prime ministers at the first opportunity.

Dutton was the favourite prime ministerial candidate from the conservative faction of the Liberal Party,and was preparing to strike at his leader. Turnbull might not have needed any extra pressure,but Dutton says he wanted to be sure. Says Dutton:“While Malcolm arrived at the right decision,I think he was leaning towards a mitigation approach.”

Turnbull has a different interpretation of their conversation. He recalls no mention of a “red line” nor any threat to resign. In a contemporaneous note in his diary provided to me,the then prime minister wrote:“Dutton came to see me to say that he could not accept any involvement of Huawei or[Chinese telecoms gear-maker] ZTE in the 5G network,much muttering of how we have to be strong in the face of China. I reminded him that I had initiated the whole 5G review,that I had raised it with the US in DC,not vice versa,and had discussed it with vice-president Mike Pence,the intelligence community and,of course,with Trump. I emphasised we needed to work through this carefully not least because we need to coordinate with the US. He seemed okay at the end.” Turnbull made no promises to Dutton,but the cabinet’s National Security Committee decided to ban Huawei on August 14.

The decision was made,the line drawn,but it was not announced for nine days. Turnbull played it cautiously;Australian diplomats informed Beijing of the ban days before the announcement.

Turnbull phoned US president Trump the day before:“When I told Trump,he seemed a bit surprised.” In the announcement itself,there was no mention of Huawei or of ZTE,and no reference to China. Just a country-agnostic principle:Australia was now prohibiting “vendors who are likely to be subject to extra judicial directions from a foreign government that conflict with Australian law”. To keep it low-key,there was no press conference,just the statement.

Peter Dutton resigned anyway. After the Huawei decision had been made but before it had been announced,Turnbull decided that Dutton was about to challenge him for the prime ministership. Turnbull pre-empted him by calling a spill motion in the Liberal party room,which he won. Dutton then resigned from the ministry while he gathered strength for another assault in three days’ time. It was at this moment,the eye of the storm,that the Turnbull government announced the Huawei decision.

But this weighty moment was given scant notice in the Australian media,consumed by yet another spin of the revolving door. The announcement was made on August 23,2018,Turnbull’s last full day as prime minister. He wasn’t around for Beijing’s reaction.

China’s foreign ministry said that it was “gravely concerned” at Australia’s “discriminatory measures”. China’s commerce ministry called it “the wrong decision” and warned of “a negative impact on the business interests of China and Australian companies”.

In theatrical crescendo,the Communist Party’s China Daily newspaper denounced the decision as “poisonous to bilateral relations” and theGlobal Times said it was a “stab in the back” for Huawei.

By this time,Scott Morrison had come through the middle to defeat bothTurnbull and Dutton to take the prime ministership. Dutton was reinstated as home affairs minister. In the secrecy of Turnbull’s National Security Committee,Morrison as treasurer had teamed with Dutton to run the hardest line against Huawei.

Dutton privately describes Morrison as a “fellow traveller” on this decision. Morrison himself claims its paternity in an interview with me:“I issued the statement[banning Huawei],” he says. “I was actually treasurer and acting minister for home affairs at the time. It was actually my decision and my recommendation,along with Mitch Fifield[then minister for communications]” . Morrison had joint carriage of the legislation because of the treasurer’s power over foreign investment,and Fifield because of his ministerial power over the telecommunications system. Of course,no cabinet decision is made without the endorsement of the prime minister. This is an example of the adage that success has many fathers,while failure is an orphan.

Australia was the first country to ban China from its 5G network,setting a precedent for others,including the US,Japan,India,New Zealand,Singapore,Denmark,Norway,the Czech Republic,Estonia,Poland and Vietnam. Britain had decided to accept Huawei,but then changed its mind in mid-2020. The Chinese-claimed island of Taiwan,which knows China more intimately than any other jurisdiction,also banned Huawei.

Most of these governments shut out Huawei by default rather than by declaration,achieving the same result but with less fanfare. Washington directed its noisy belligerence to Beijing,but Japan,New Zealand,Norway,Singapore and Vietnam appeared to merely choose other companies by chance,and India said nothing officially but circulated an internal directive to all government ministries to exclude Huawei from any tenders.

These countries hoped to be less obvious targets for Xi Jinping’s retaliation. Sweden was more direct. Its Post and Telecom Authority announced in October 2020 that it would ban Huawei and ZTE because the “influence of China’s one-party state over the country’s private sector brings with it strong incentives for privately owned companies to act in accordance with state goals and the communist party’s national strategies”.

Australia had some evidence for its decision. The Chinese Communist Party enacted the National Intelligence Law of 2017. This law unequivocally requires that “any organisation or citizen shall support,assist and cooperate with state intelligence work” and aid the national intelligence agencies to “carry out intelligence work at home and abroad”. The weight of evidence only increased after the Turnbull government’s announcement.

Beijing has now taken further measures to co-opt China’s private sector. By the end of 2018,more than 90 per cent of private businesses in China had established internal CCP cells to guide and monitor them and enforce the party’s will,according to Beijing’s official tally.

And in 2020 Xi Jinping announced a policy that obliged private businesses to work with the party’s United Front Work Department,which is responsible for mobilising Chinese populations abroad to serve Beijing’s interests. Private companies are required to “unswervingly listen to and follow the steps of the party”. Each of these measures explicitly adheres to the all-encompassing principle that Xi enshrined in the party’s constitution in 2017:“Government,the military,society and schools,north,south,east and west – the party leads them all.”

In this way the minutiae of Australian security and politics intersected with the great global geopolitics of our time. Morrison and Dutton now regrouped to prosecute Australia’s resistance to the Chinese Communist Party’s drive for dominance. And to brace for Xi’s vengeance.

This is an edited extract from Peter Hartcher’s book Red Zone:China’s Challenge and Australia’s Future (Black Inc.,$33),out now.

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